Most of the job loss is from offshoring, not the recession

I point to an editorial on the Huffington Post by Sen. Fritz Hollings. He's calling out D.C. and saying Washington is plain committing fraud on job creation by refusing to address trade and global labor arbitrage.

An important part of the job fraud is to make the people feel like the loss of jobs is due to the recession, not off-shoring. Long before the recession, South Carolina lost its textile industry; North Carolina lost its furniture industry; Detroit its automobile industry, and California its computer industry, etc. President Obama wants to increase exports, but we have nothing to export. Today, the United States has the export profile of an eighteenth century colony, with the only value-added products exported being chemicals, agriculture and airplanes. Last week, the Wall Street Journal announced that the largest chemical producer in the United States was off-shoring. Most of the job loss is from off-shoring, not the recession. But Washington acts as if nothing can be done to limit the off-shoring and protect our economy.

Globalization has developed into a trade war with production looking for the cheapest country to produce, with fierce competition for industry and jobs. Necessarily, every country has developed an industrial policy in this competition to protect its economy.

One can see the truth that job loss is not just this recession, but a long steady decline caused by global labor arbitrage. Just look at the total number of jobs in a particular occupational category over a decade. For one example, see this graph on information services jobs.

Hollings has a host of policy recommendations to fix the real problem and I personally would add a requirement that every single opportunity, from K-12 to the most advanced job in this country have a new affirmative action program attached, Americans preferred. Jobs in this country should go first and foremost to the citizens who make up the nation. It's obvious the United States cannot be the world's job market. I would also add to put an immediate ban on offshore outsourcing of all Federal and State contracts. Does it make sense to ship U.S. taxpayer dollars for jobs offshore? (No!) Below are Hollings suggestions, note the VAT is not a sales tax, it's an at the border adjustment tax.

Since the U.S. has suffered a 5.8 trillion dollar trade deficit in the last ten years, President Obama should levy a 10% surcharge on imports like President Nixon did in 1971.

Don't wait for a basic industry to go bankrupt like General Motors, but once production is endangered, institute import quotas or tariffs under Section 201 of the Trade Act.

Activate the 1950 War Production Act reauthorized as the Defense Production Act of 2009 (S.1677). This requires the nation to have a ready supply of material necessary for our national security. Today, we can't go to war save the favor of some foreign country for supplies. Stop the off-sets for military sales and activate this law and policy, creating millions of jobs. President Kennedy used this law in 1961 to launch his 7-point program, saving the textile industry. Hearings before a Cabinet Committee determined that next to steel, textiles were the second most important to our economy. The Committee found in 1961 that "we can't go to war in Japanese uniforms."

Stop equivocating on "Buy American" and institute a "buy domestic" program like other countries competing in globalization.

President Obama can boost exports, pay for health reform and start paying down the debt by replacing the corporate income tax with a 5% VAT. Three percent will more than replace the revenues from the corporate income tax; 1% will pay for health reform, and 1% will start paying down the debt. The ox is in the ditch. We don't have time for a study commission.

Hollings goes on to mention how mainstream Economists continue to consider it taboo to mention offshore outsourcing.

Not on this site! We represent the peanut galley, ya know the ones whose financial livelihoods are continually under attack. We're screaming it from the rooftops!

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According to the fellow on the Friday Night Movie”, if I understood him correctly, a significant part of the off shoring is not the result of ‘cheap labor’ but superior technology. For example, in 1970 the Boeing 747 was completely made in the US – “every nut and bolt”. But, today for 787 the majority of the ‘value added’ is from imports (something like that proportion). For example, the wings are made in Japan not because of cheap labor but because Japan has the ‘carbon fiber’ technology that does not exist in the US.

More generally, I can’t remember exactly how he put it but, Germany, Japan, Taiwan and S. Korea are a major source of our manufacturing jobs because of their technology – not their cheap labor. Further, this imbalance is not the result of a ‘dues ex machina’ ‘laws of the free markets.’ Rather, their successful national policy to develop manufacturing export.

Also, I would note that in his talk about China I don’t recall him mentioning the exchange rate at all, at least it did not (as I recall) play a significant part in his presentation. This is quite the opposite of much that is being written on in mass media and blog economics. If what he says about Japan, Germany, etc., one wonders why the exchange rate is not affecting their manufacturing export industries. This is not to say that exchange rate is not a factor; but I think our preoccupation with it at the expense of other more significant international trade issues and national policies is akin to “stepping on dollars to pick up pennies,” – just a thought.

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and I think a point where many converge is a national manufacturing, trade, economic strategy and policy. In other words, the U.S. should be subsidizing certain industries as well as protecting them, is common.

On cheap labor, I think he's missing the capital costs, it costs huge bucks to build a manufacturing plant and it is cheaper to build them in many other countries, but in terms of services, labor costs are much more of the expense, so cheap labor comes more into play.

You don't hear me just talk about the exchange rate, it's one factor, although recently analyzed to be huge!

I was surprised to see analysis saying if the RMB was floated, it would literally wipe out the trade deficit with China but you have to have something to trade, so focusing in on a national manufacturing policy, subsidies, support, tax breaks and so on, is critical.

He's an interesting guy, he lives in Japan so he sees first hand how they all build up their manufacturing bases and wala, prosper and then dominate exports.

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.. I can’t remember exactly how he put it but, Germany, Japan, Taiwan and S. Korea are a major source of our manufacturing jobs because of their technology – not their cheap labor..

That is what is known as a "circular arugment" -- the technology was transferred to them in order to manufacture those products, therefore the jobs must be transferred to them also!

Simply look into Volvo's experience in China and how much money they lost (over $1 billion). I don't mean to diss Japan (have always been a fan of some of their tech and business, although I wouldn't necessarily wish to ever work for them), but a close examination of their rocket tech program's history demonstrates my point.

If you want a superior BMW, Germany's the one, but the Jenson Interceptor was a conglomeration of the best of all automative worlds, not solely German (or French, or British, or American), and it was made in the UK.

The argument for transferring all the technology over to a foreign country, so that they can manufacture a product, then proclaiming the reason for offshoring those jobs is because you transferred the technology, buggers belief!!!!!

And that is the comical state of things in America today!

The reason for shipping programming and tech jobs to Ghana and Nigeria is therefore because of their superior technology?

The same pathetic premise should hold true for Bangladesh?

How can any functional adult regurgitate such nonsense?

If such were really the case, Intel would not have lost over $1 billion in their India Chip Design project. (Which they wisely closed and transferred out of there.)

Although, many Indians would claim that they created the IT industry there. (A number of us oldtimers would strongly dispute that.)

When a workforce develops products and technologies, then are continuously laid off while their achievements are offshored over decades, and repeatedly told they are incompentent and useless, they wisely ignore the souce of such drivel.

What has taken place is that the United States, a culture devised for innovation and progress, has been thorough disassembled and destroyed from doing that by all of those plunder and pillaging debt-financed billionaires.

End of story.

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He is pointing to how these countries have strong national manufacturing, trade, development policies which is how they capture these industries.

But I think the weight proportion maybe a little off from what we know.

I mean he has some real world good points here.

Intel lost $1B? That's so amusing, which leads to another point...I honestly think we have some insider "political" agendas moving up in these companies which is really all about helping their home country and has little to even do with spreadsheet costs or skills.

How many of these "design centers" actually created much? Sure seems they still are busy displacing Americans and having those Americans train them before being fired...

i.e. knowledge and skills transfer, direct from U.S. workers to another nation's workers.

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Negative, I'm addressing the recently popular meme or mantra that jobs were shipped due to superior tech and/or manufacturing base in foreign countries.

Nigeria, Ghana, Bangladesh, and Malaysia didn't "capture these industries" because of their national manufacturing base, they captured it because Micron closed their plants in Idaho, then opened them in Malaysia as a form of stealth labor arbitrage. Ditto the rest, as far as process goes.

The lunatic corporate concept that innovation and creation can take place in any culture on the planet completely and flagrantly ignores cultural context.

In Ireland's history, the best academic minds entered the celibate priesthood, so the majority of them didn't reproduce (Yes, I realize there wasn't true adherence to such religious nonsense, and there were offspring, etc., but assume the general overall scheme was being followed).

In the Russian Jewish history, the best academic minds entered the rabbinate (became rabbis) and were encouraged and financially supported by their community to have as many children permissable economically speaking.

Which is why there are more scholastically superior (on a numeric, per capita basis) Ashkenazi descendants than Irish descendants (and far more examples of photographic memory appearing in the Ashkenazi group).

The repeated idea that retraining will solve any and all problems, oft repeated now for the past thirty years, is silly when there are no jobs or means of producing those jobs. Retrain for what?????

As long as the increase in the financialization - or phantom economy - in this culture continues, the onward march of the neofeudalists continues unabated.

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Putting up some crap about certain gene pools being superior, come on James, Eugenics?

Micron did it not just for cheap labor but also tax incentives and costs of plant creation. There is a large push in Malaysia and a host of countries to capture Silicon manufacturing, has been for some time...so yet they also peddled their wares to Micron. I don't know each deal terms but some of the deal terms to China I scratch my head and wonder why any company would sign up for them. Stuff like needing to partner with a state owned company, the latest is claiming they will only honor patents "domestically sourced", i.e. do your R&D here or we'll rip off your intellectual property...

Thinking purely from a business sense, with friends like that, who needs....

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It's not about Eugenics, nor is it crap, nimrod! Learn some science for a change instead of continually prattling about it.

It's about cultural differences built up over long periods of time. India was under British rule for four hundred some years -- although I don't underrate their inventiveness, they are not exactly a cauldron of invention and innovation. The same goes for other cultures, although, given the right circumstances, I'm sure they will catch up.

Geez, you have an absurdly low-level of comprehension.

MY FINAL POST AT THIS SITE!

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Yes, social constructs and social values do create a climate of innovation and industry. So does government policies, but look at what you typed and remember I am the site admin, the resident content police. (and yes, I did take Soc. in college).

You are amplifying birth, reproduction instead of the fact Jews studied the Torah, scholarship is a huge cultural value.

Also, some of these beliefs that it is "in our genes" are well known, even Larry Summers decided one day that women, due to their sex, just couldn't do math. So, it is not like this attitude or belief isn't around in mass.

Not only is it my job to keep things on topic, but I also have to screen out the weird. From your response, you're saying I misinterpreted, ok, but my job, from the typing is to make sure we do not encourage those who want to claim one nation, one society, one race is superior to another, if you get why I would jump on your typing, which I hope you would. If this is a miscommunication issue, not a big deal, happens all of the time in fast typed comments, but I am the content police around here, no one else is doing it.

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...because you and Robert Oak are in essential agreement about the most important things. Too bad that things degenerate into literal name-calling ("nimrod") which does not favor rational discussion, although I can hardly fault you alone as Oak has a very aggressive and sneering style, and responses in one vein tend to beget responses in the same vein. Too bad if you are serious about that being your final post at this site, as readers of this site will be the losers. Too bad that all this is so typical of human nature.

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If you want him to come back and frankly I wish you all would realize the amount of time and effort I have to put into this site to moderate content and make sure the site is not spammed or seriously skewed, anyway you can click on his ID and send him an email through the contact tab.

I think he's overreacting, esp. with so much stuff out there that does believe it's all genes and I might note, that some of our lovely foreign guest workers promote that idea with a good 25k reads a day, so my reaction is not from outer space.

Of course I would like him to.

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The claim is not true and the title is blatantly misleading. Most of the 'lost jobs' have simply been eliminated not outsourced. Does anybody seriously think that millions of jobs have been outsourced from the US in the since 2008? Even a cursory glance at the Indian and the Chinese economy will show that the number of outsourced jobs in the last 2 years is only a small fraction of the jobs eliminated in the US.

Outsourcing is definitely a problem for the US economy, but it is not the most pressing one. The real problem is the overall structure of the economy. This problem cannot be understood by simplistic numbers and economic indicators. The real culprit is society's greed, worship of wealth and the wealthy. Broadly speaking this has allowed the growth of jobs in three areas. 1.Banking and finance which have systematically perpetrated fraud on the entire global economy. 2.Legal and managerial jobs in auxiliary roles that support banking and finance. 3. IT and communications that offer 'software solutions' to the finance and banking sector.
Even in these areas jobs lower down the food chain are essentially on a subsistence wage.
Low end low paid jobs in IT and manufacturing have been outsourced to India and China where the wages are a fraction of the already low American wages.
The temporary real estate boom created low paid jobs in construction and engineering for a few years. Plenty of low paid jobs were created in the entertainment sector too. Basically the economy has been restructured into a feudal one with aristocrats and a large population of serfs supporting their greed.
When I refer to jobs as 'low end' or 'low paid', I refer to them in real buying power terms. All the low paid jobs created during the real estate boom never paid enough, when the cost of housing was rising, reducing the buying power the wage and driving the people into debt. The debt burden of even the so called 'middle class' soared during the early years of this century. Even highly educated scientists and engineers in sectors that have not seen outsourcing, have not been getting decent jobs for a while now.
All these indicators point to the fact that the culture of greed has allowed a massive restructuring of the economy in favor of financial manipulation and legal ponzi schemes. But accusing the society of collective blind greed is perhaps not popular for the economic populist. Any sane society would dismantle the entire fancy financial sector and not try to chase imaginary profits.

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Truth is we don't have an accurate tally, but there is a lot of evidence to back it up. Manufacturing has lost millions of jobs this recession. 3 million are attributed to NAFTA alone. It has shrank from about 15% of the overall GDP to about 11% currently. Service sector jobs have shrank and part of trade is the "free flow of capital"

You also are unaware, the group most hit by offshore outsourcing is engineers and scientists. Advanced R&D has been offshore outsourced again in the billions of dollars and in the jobs it is in the hundreds of thousands.

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NAFTA and WTO are central economic planning organizations that meet in secret to decide what sectors of a country’s economy are going to be benefitted at the expense of other sectors and what industries are going to be outsourced to other countries. If we had real free trade; trade agreements would be less than a paragraph where all tariffs and non-tariff barriers would be elminated in which the US would not have to beg like it currently is for other countries to accept more US exports. Didn’t the special interests that lobbied for NAFTA and WTO get the message that central economic planning never works. I guess they have never read Mises and Hayek’s works on economics.

It seems the former Soviet Union’s planning boards, NAFTA, WTO, the FED and other central banks all have something in common which is that they meet mostly in secret to devise economic plans to benefit their favored special interests. The printing press stands behind the special interests. They get newly created money out of thin air for R&D expenses, to pay for the outsourcing of jobs overseas and to bail them out when things go south.

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We have Socialism for the special interests. Remember that the money printing stimulus packages have allowed the US multinationals to receive record profits. So money was created out of thin air to fund their R&D, to pay for the outsourcing of US jobs and to bail them out when things went south. The Soviet style central economic planning from WTO, NAFTA and Central Banks have bankrupted the US. Maybe communities should issue their own currencies like Hayek spoke about in his works, Choice in Currency and the Denationalization of Money. At least if communities issued their own currency, they would have sovereignty over their own trade policies. For example, communities that issued their own currencies could undervalue their currency against the dollar so that based on paper exchange rates labor costs could be just as cheap as China and other developing countries.

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You do not have socialism in the US - the 'commons' are increasingly being owned by corporate interests in the US rather than being owned by the public or common ownership. The US is a corporatist state - a system dominated by corporate entities and interests that secures resources and policy favors for their needs at the expense of wider society. This is reflected by the various 'power' groups that influence the polity in the US. Aspects that were highlighted by C.W.Mills (The Power Elites) and President Eisenhower in terms of his reference to the Industrial Military Complex.

Interestingly the US has always had the largest centrally planned economy in the world. The Industrial Military Complex dwarfed the USSR in all the years of the cold war.

Another point to note regarding banks and credit (debt) creation is that the US States that have the healthiest finances/economies are those with their own banks rather than those that have participated in the Wall Street debt engine (Municipal Bond Market). There is something to be said for closing down the banking sector and stripping it back to basic banking services based on a simple interest model or a service for a fee.

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